Paytm stock has been upgraded to a ‘Buy’ rating by analysts at Goldman Sachs days after the company reported its quarterly results. Paytm reported an 88% increase in consolidated revenue from operations to Rs 1,456 crore while net loss widened to Rs 778 crore during the October-December quarter. The stock fell to less than half of its IPO price of Rs 2,150 per share and now trades at Rs 945 per share. The sharp fall in the stock price has made analysts believe that the risk-reward ratio is favorable. However, Goldman Sachs and Morgan Stanley have both trimmed their target prices for the scrip.
Goldman Sachs upgrades to ‘Buy’
“Our analysis suggests the current share price is implying multiple headwinds including MDR caps, a decline in market share for Paytm, and significantly slower ramp-up of Paytm’s financial services, which we view as unlikely,” Goldman Sachs said in a note. The brokerage firm has trimmed the target price to Rs 1,460 per share, down from Rs 1,600 apiece. The fresh cut in Goldman Sachs’ target price for Paytm stock comes just eight days after a previous marginal cut.
Analysts at Goldman Sachs said that the stock rating has been changed owing to a better than expected take rate and continued market share gains in the payments vertical. Further, the Continued strong traction in lending, with new disclosures suggesting a healthy performance of loan portfolio has aided the view. Significantly improved risk-reward too makes analysts believe there is upside potential.
Morgan Stanley cuts target price
Morgan Stanley has cut their base case target price to Rs 1,425 per share, down from 1,875 earlier. However, the global brokerage firm retains an ‘overweight’ rating. “… Our price target though moves lower to Rs 1,425 — this is mainly owing to lower valuation multiple at US peer firms. We remain constructive on Paytm and see attractive risk-reward,” Morgan Stanely said in a report. Morgan Stanley has had a bullish outlook on the stock for quite a while now.
From the recently announced quarterly results of Paytm, analysts see positives in 90% on-year revenue growth and Non-UPI GMV growth accelerating to 77%. Financial services and other revenues grew by ~200% on-year led by continued acceleration in loans disbursed.
Bull, base, and bear case targets
Morgan Stanley’s bull case target price has been cut to Rs 2,900 from Rs 3,800 earlier.
Base case target has been set at Rs 1,425 apiece from Rs 1,875 earlier.
Bear case scenario now expects the stock to tank to Rs 580 from Rs 800 per share.
Goldman Sachs has a bull case target price of Rs 2,090 per share on Paytm.
In the base case scenario, the stock is expected to soar to Rs 1,460 per share.
Bear case target price set by Goldman Sachs is at Rs 820 per share.
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